How to build credit as a teenager

You’ve probably heard people talk about credit, credit scores, debt, and even credit reports. But what does all of this mean — and why is it important?

A credit score is a measure of how responsible someone has been when it comes to repaying loans and credit cards. It’s essential for various personal finance tasks, including applying for loans and securing an apartment lease.

Here’s a rundown on what you need to know about how to build credit as a teenager.

6 ways teenagers can build credit

You don’t have to wait until you’re well into adulthood to start your credit journey. Whether you’re under 18 or just turned 18, these strategies can help you build a solid foundation. 

1. Become an authorized user

If you’re under 18, ask a parent or guardian to add you as an “authorized user” on their credit card. If added, you would have your own card linked to your parents’ account. You can use it or just let your parents hold onto it.

If your parents have good credit, this approach helps because you can share their credit history. The account (the credit card) starts showing up on your own credit report, and the payment history and other details can begin contributing to your own credit score.

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2. Get your first job

You typically need a steady income to qualify for most credit products. A part-time job, summer job, or side hustle can help demonstrate to lenders that you can handle monthly payments. Earning your own money also gives you real-life practice with budgeting and paying bills on time, habits that will directly support your credit score. Plus, having a steady income makes it easier to get approved for things like your first credit card or a small loan.

Landing your first job is also an excellent time to get a debit card if you don’t already have one. While a debit card won’t help you build credit exactly, it does help you get used to the ins and outs of managing your own money. You’ll start to see patterns in your spending habits, which often leads to making smart money decisions. And you’ll get the hang of budgeting for things you really want without the risk of going into debt.

3. Open your first credit card (age 18+)

A secured credit card requires a security deposit. For example, you could open a secured card, deposit $300 into a locked account, and then get the card with a $300 credit limit. (Eventually, you get the deposit back when you close the card or when the card issuer agrees to convert the card to a standard unsecured credit card.) 

You can then use the card as you usually would and make monthly payments, just as you would with a standard credit card. 

4. Take out a credit builder loan (18+)

Credit builder loans are often a better option for newcomers to the world of credit. They are similar to secured credit cards in that they’re specifically designed to help you build credit. Most credit unions and many banks offer them.

You open the loan, and the lender sets aside an amount of money (often $300 to $1,000) in an account for you. But you can’t access the money yet! Then, you make monthly payments toward the loan until it’s paid off. Once it is, you can access the full loan amount. 

The benefit here is that each payment you make toward the loan will be reported to the credit bureaus, which helps you establish a positive credit history.

5. Keep balances low

Using too much of your available credit can lower your score because it signals to lenders that you might be overextended. Aim to use less than 30% of your limit at any time, and lower is even better. Paying off your balance in full each month not only keeps your utilization low but also helps you avoid interest charges.

6. Monitor your credit score

It’s a good idea to keep an eye on your credit score. You can access free credit scores through services like Credit Sesame or Credit Karma. Many card issuers also offer credit score monitoring (once you have a credit card with them). You can also get a free credit report once per year from each bureauat AnnualCreditReport.com.

How do credit scores work?

Credit is the ability to borrow money now and pay it back later successfully. Your credit score is a number (300-850) that tells lenders how responsible a borrower has been. 

For example, if you apply for a credit card, the lender will check your credit. This may include reviewing your credit score or accessing your credit report from one of the three major credit bureaus (i.e., Experian, TransUnion, or Equifax). 

While the credit score is a quick snapshot, your credit report will include detailed info about your credit accounts, debt, and payment history — including any dings, such as missed payments, bankruptcies, or accounts sent to collections.

If the lender likes what they see (like consistent on-time payments and low debt utilization), you’re more likely to get approved for the credit card. Plus, you’re more likely to get a more competitive interest rate, which makes borrowing money cheaper.

How are credit scores calculated?

There are two primary credit scoring models: FICO and VantageScore. VantageScore combines information from all three credit bureaus, whereas FICO is based on data from a single credit bureau.

Here’s how FICO Scores are calculated:

• Payment history (35% of total score). Measures whether you’ve paid on time.

• Amounts owed (30%). How much you owe compared to your current credit limits.

• Length of credit history (15%). How long you’ve been using credit and the ages of your accounts.

• New credit (10%). How often you apply for new credit.

• Credit mix (10%). The different types of credit you use or have used (loans, credit cards, etc.).

VantageScore uses slightly different weights, but also prioritizes payment history. 

So, as a teen, it’s essential to make on-time payments on all your credit products, like loans or credit cards. 

Why building credit early matters

Starting early gives you a head start on financial independence. The sooner you begin building credit, the more time you have to create a solid history, which pays off in more ways than one:

• Better odds of getting approved for loans or rental applications

• More competitive interest rates, which make borrowing cheaper

• A longer credit history, which is a factor in your score

• More flexibility and financial options when you need them

Start building credit as a teen 

If you’re already thinking about building credit at your age, you’re on the right path! Why not continue your money skills journey with Greenlight? Greenlight is a money app designed for teens, offering powerful features for spending, saving, and investing with parental approval – perfect for beginners. 

Ready to learn about the world of money? Sign up for Greenlight today

FAQs

What is the minimum age to start building credit?

You can be added as an authorized user as young as 13 with many credit card issuers. You can apply for your own credit card at 18.

What’s a good credit score for a teenager?

Anything above 670 is considered good, but as a teen, focus on establishing positive habits first.

Can a teenager under 18 get their own credit card?

Not their own, but teens can be added as an authorized user on a parent or guardian’s credit card.

Is being an authorized user on a parent's credit card safe for my teen's credit?

Yes, as long as the primary cardholder makes on-time payments and keeps balances low.

How often should a teenager check their credit report?

At least once a year, but checking your score monthly can help you catch issues early.

How long does it take for a teenager to build good credit?

It can take 3-6 months to obtain a score after opening an account, and several years to establish a strong credit history.